A federal grand jury yesterday returned an indictment accusing three Alabama men of Austal USA LLC, a Mobile-based shipbuilder that builds ships for the US Navy, including the Independence-class Littoral Combat Ship (LCS). for organizing an accounting fraud scheme. Austal USA is a wholly owned subsidiary of Austal Limited, an Australian company traded over the counter in the United States on American Depositary Receipts and on the Australian Stock Exchange.
According to court records, Craig Perciavalle, 52, Joseph Runkel, 54, and William Adams, 63, all of Mobile, and their co-conspirators allegedly conspired from at least 2013 or about 2013 to at least about July 2016 to mislead Austal Limited shareholders and the investing public on Austal USA’s financial condition. Specifically, the defendants are accused of artificially reducing and suppressing an accounting ratio known as Estimate at Completion (EAC) in relation to several LCS vessels that Austal USA was building for the US Navy. The suppression of EACs allegedly incorrectly overstated Austal Limited’s reported profits in its public accounts.
The defendants and their co-conspirators allegedly manipulated the EAC numbers in part by using so-called “program challenges” – purported cost-saving targets – which were in fact “plug” numbers and fraudulent means to hide rising costs that should have been included in Austal USA’s financial statements and ultimately reflected in Austal Limited’s reported earnings. The defendants allegedly did so, among other things, to maintain and increase the share price of Austal Limited shares. When the higher costs finally became known to the market, the share price was significantly adversely affected and Austal Limited wrote down over US$100 million.
Perciavalle, Adams and Runkel are each charged with one count of conspiracy to commit wire fraud and wire fraud affecting a financial institution, five counts of wire fraud and two counts of wire fraud affecting a financial institution. If convicted, they each face a maximum sentence of 30 years in prison for conspiracy charges and each count of wire fraud involving a financial institution, and 20 years in prison for each count of wire fraud.
Assistant Attorney General Kenneth A. Polite, Jr. of the Department of Justice’s Criminal Division, US Attorney Sean Costello for the Southern District of Alabama, Acting Special Agent Darrin K. Jones of the Southeast Field Office of the Defense Criminal Investigative Service (DCIS), and The Acting Special Agent in Charge Michael D. Butler II of the Naval Criminal Investigative Service (NCIS) White Collar Crimes Branch made the announcement.
DCIS and NCIS are investigating the case.
Deputy Chief Kyle Hankey, Acting Deputy Chief Christopher Jackson and Trial Attorney Laura Connelly of the Criminal Division’s Fraud Division and Assistant US Attorney Christopher Bodnar for the Southern District of Alabama are prosecuting the case.
If you believe you are a victim in this case, please contact the Fraud Section’s Victim Witness Unit toll free at (888) 549-3945 or email [email protected]. Victims can find case updates and additional information at www.justice.gov/criminal-vns/case/united-states-v-craig-d-perciavalle-et-al.
An accusation is just an allegation. All accused are presumed innocent until proven guilty in a court of law.
